Fifth ACOI Annual Compliance in Finance Conference

1. Fifth ACOI Annual Compliance in Finance Conference Radisson Blu Hotel, Dublin 8 14 November 2011

2. The Criminal Justice Act 2011: Implications for the Compliance Environment Paul Appleby Director of Corporate Enforcement

3. Background to the 2011 Act • Curbing White Collar Crime – a Legislative Priority • D/Justice and Equality issued a Discussion Document on Organised and White Collar Crime in October 2010 • ODCE Submission to the Department in November 2010 • Reforms effected in a new Criminal Justice Act 2011 • Two Particular Issues Today • a new ‘withholding information’ offence • a general whistleblowing protection provision • Value of Measures for Compliance

4. Scope of Criminal Justice Act 2011 • Enhance the detection/investigation of ‘relevant offences’ • New options to secure documentary evidence and the statements of ‘reluctant witnesses’ • New provisions relating to the questioning of suspects, including the suspension of questioning • Revised safeguards concerning a suspect’s access to a lawyer

5. ‘Withholding Information’ Offence “19(1): A person shall be guilty of an offence if he or she has information which he or she knows or believes might be of material assistance in – • preventing the commission by any other person of a relevant offence, or • securing the apprehension, prosecution or conviction of any other person for a relevant offence, and fails without reasonable excuse to disclose that information as soon as it is practicable to do so to a member of the Garda Síochána.”

6. What is a ‘Relevant Offence’? • All are serious offences punishable by a prison term of five years or more • All will generally give rise to lengthy investigation • Selected offences arise in banking, investment of funds, tax law, company law, money laundering, financing terrorism, theft and fraud, bribery and corruption, etc • Minister may extend the offences list by statutory instrument • About half are identified in the following two slides

7. What is a ‘Relevant Offence’? • Central Bank Act 1971: Section 58 offence relating to a breach of Section 17, 18, 23, 24 or 25 of that Act • Insurance Act 1989: Section 37(6) or 41(1) offence • Trustee Savings Bank Act 1989: Section 20(4) or 24(4) offence • Unit Trusts Act 1990: Section 11(3) or 13(5) offence • Investment Limited Partnerships Act 1994: Section 25(5), 27(4), 35(7) or 35(8) offence • Investment Intermediaries Act 1995: Section 10(16), 19(1)(b), 30, 34, 35(4), 46(2), 52(3), 52(5), 52(6), 52(9), 54(6), 56(9), 79(7) or 79(8) offence • Consumer Credit Act 1995: Section 12(2) offence relating to a breach of Section 97(1), 97(3), 101, 102 or 127 of that Act • Investor Compensation Act 1998: Section 29(3), 43(7) or 43(8) offence

8. What is a ‘Relevant Offence’? • Investment Funds, Companies and Miscellaneous Provisions Act 2005: Section 14(3), 15(2) or 48 offence • Market Abuse (Directive 2003/6/EC) Regulations 2005: Regulation 5 or 6 offence • European Communities (Reinsurance) Regulations 2006: Regulation 20(2), 22(4), 58(9), 59(8), 60(6), 62(4) or 76(1) offence • Transparency (Directive 2004/109/EC) Regulations 2007: Regulation 76(4) offence • Markets in Financial Instruments and Miscellaneous Provisions Act 2007: Section 5(2) offence relating to a breach of Regulation 19, 40(1), 52, 112(1), 159 or 187B of the European Communities (Markets in Financial Instruments) Regulations 2007 • National Asset Management Agency Act 2009: Section 7 offence relating to a person other than a credit institution • Central Bank Reform Act 2010: Section 48 offence

9. ‘Withholding Information’ Offence • Certain themes in those relevant offences include: • fraud or dishonesty (e.g., insider dealing) • knowing or reckless disclosure of false or misleading information in financial statements, prospectuses or to a public body • breaches of certain prudential requirements (e.g., asset/liability ratios) • inadequate books and records of business activity

10. ‘Withholding Information’ Offence • Points to note • relates to anyone on notice of the ‘relevant offence’ • obligation is met by alerting a Garda as soon as possible (Central Bank, another regulator or others will not suffice) • fines and/or imprisonment arise if convicted of a failure to notify without a reasonable excuse • purpose is to prevent the commission of the ‘relevant offence’ or to help apprehend those responsible for it

11. Whistleblowing Protection • This topic has been debated for some time. Previous efforts to legislate generally here in support of whistle-blowers were abandoned in favour of a sectoral approach • ODCE was unsuccessful in securing support within the Company Law Review Group for such a measure in company law • Section 20 represents a step away from the sectoral approach which has been adopted up to now

12. Whistleblowing Protection “20(1) An employer shall not penalise or threaten penalisation against an employee, or cause or permit any other person to penalise or threaten penalisation against an employee – • for making a disclosure or for giving evidence in relation to such disclosure in any proceedings relating to a relevant offence, or • for giving notice of his or her intention to do so.”

13. Whistleblowing Protection • Points to note • penalisation is defined very broadly • however, the section also recognises that an employer may need to act to sustain its business • an employer who breaches Section 20(1) is guilty of an offence • an employee who knowingly or recklessly makes false disclosures to a Garda is also criminally liable • a penalised employee may seek redress from a Rights Commissioner

14. Implications for Compliance • Many financial entities exercise a critical role in safeguarding the assets of their clients • Compliance with law and prevailing standards is therefore an important end in itself • If things go wrong, the value of compliance is particularly apparent as the resultant damage to reputation and customer confidence may be very serious • At these times, prevention is always given priority

15. Implications for Compliance • The mandatory reporting of potentially serious misconduct to the Gardaí is welcome • The measure will further deter misconduct • And the associated provisions in the Act to help Garda investigations of white collar crime should result in more prosecutions coming before the Courts in due course • This too should assist in raising the profile of compliance as a key component of financial sector credibility

16. Implications for Compliance • Some of you may be concerned by the reporting obligation, but it is not limited to compliance officers • It is shared by all of the persons with knowledge of the potential offence • It also offers ACOI members a valuable opportunity to secure the implementation of effective internal measures to support compliance and to reinforce good practices

17. Concluding Comments • The 2011 Act falls outside the ODCE’s specific remit • However, I believe that the whistleblowing and related provisions may have passed ‘under the radar’ to date • This Conference offers a welcome opportunity to alert you to this new Act in support of your valuable compliance work • I hope that you will examine its implications for your own work and inform your colleagues of its implications

18. Thank You The Criminal Justice Act 2011 is available at www.attorneygeneral.ie The Explanatory Memorandum to the Bill is at www.oireachtas.ie Information on tackling white collar crime is at www.justice.ie Information on company law compliance is available at www.odce.ie